In a significant move to diversify its rapidly expanding oil sector, Guyana is poised to sign a crucial oil production-sharing agreement (PSA) with a consortium led by French energy giant TotalEnergies. This development marks a pivotal moment in Guyana’s journey as the world’s fastest-growing oil-producing nation.

The Deal

The agreement, expected to be signed in the coming weeks, will grant exploration rights for Block S4, which was awarded to the TotalEnergies-led consortium during Guyana’s first-ever offshore auction in 2023. The consortium includes QatarEnergy and Petronas, bringing a wealth of international expertise to Guyana’s oil industry.

Diversification Efforts

Guyana’s Energy Minister, Vickram Bharrat, expressed enthusiasm about welcoming these major oil companies, stating, “We’ll be very happy to have them in country.” This move is part of a broader strategy to attract diverse players to Guyana’s oil sector, which is currently dominated by an ExxonMobil-led consortium.

New PSA Terms

The agreement will be based on Guyana’s new model PSA, which includes more favorable terms for the country compared to previous agreements:

• 10% royalty rate (up from 2% in the Stabroek PSA)
• 65% cost recovery ceiling (down from 75%)
• 50/50 profit sharing after cost recovery
• 10% corporate tax

These terms reflect Guyana’s growing confidence in its oil industry and its desire to maximize benefits for its citizens.

Guyana’s Oil Boom

Guyana’s rise in the global oil market has been meteoric. The country is on course to reach a production capacity of 940,000 barrels per day (bpd) in 2025, representing nearly 1% of global supply. This is a significant increase from the 616,000 bpd produced in 2024.

Future Prospects

Minister Bharrat indicated that at least three other contracts for exploration blocks, also awarded during the 2023 auction, are expected to be signed this year. This flurry of activity underscores Guyana’s commitment to expanding its oil sector rapidly and strategically.

Challenges and Opportunities

While the oil boom presents unprecedented opportunities for Guyana’s development, it also brings challenges. The government faces the task of managing this sudden wealth responsibly, ensuring environmental protection, and avoiding the pitfalls that have plagued other resource-rich nations.

Regional Impact

Guyana’s emergence as a major oil producer is reshaping the energy landscape of the Caribbean and South America. The country is poised to become Latin America’s fifth-largest crude exporter, following Brazil, Mexico, Venezuela, and Colombia.

As Guyana continues to navigate its newfound oil wealth, the signing of this agreement with TotalEnergies and its partners represents a significant step towards diversifying its oil sector and solidifying its position on the global energy stage. The coming years will be crucial in determining how effectively Guyana can translate its oil riches into sustainable development and prosperity for its people.